Question

Nicolette is a self-employed consultant who uses 15% of her residence as an office. The office is used exclusively for business and is frequented by customers on a regular basis. Nicolette also uses her den as an office (7% of the total floor space of her home) to prepare bills and keep records. However, the den is also used by her children as a TV room. In 2019, Nicolette's net income from the consulting business (other than her home office expenses) amounts to $90,000. She also incurs $1,200 of expenses directly related to the office (e.g., painting of the office, window blinds). Nicolette incurs the following expenses in 2019 related to her residence E: (Click the icon to view the expenses.) Read the requirements Requirement a. Which of the expenditures above (if any) are deductible for 2019? Are they for AGI or from AGI deductions? Complete the table below to show the amount and classification of each of expense in (Nicolette is electing to use the "actual expenses" rather than the "safe harbor" method. Complete all input fields. Enter a "0" if an amount is not deductible. Amount of Type of A Data Table Deduction Deduction - X $ 1,200 Direct home office expenses Indirect home office expenses: Real estate taxes Mortgage interest Insurance $ 3,200 L 8,000 600 Real estate taxes Mortgage interest Insurance Depreciation Repairs and utilities 3,200 8,000 600 6,000 2,000 19,800 Depreciation 6,000 Repairs and utilities 2,000 Total Total indirect home office expenses Total expense for office in home Print Done Requirement b. Would your answer to Part a change if Nicolette's net income from consulting were only $3,480 for the year? (Nicole the "safe harbor" method.) if Nicolette's income were only $3,480 for the year.

Answer 1

Answer a. Deductible Expenditure Amount of Deduction Type of Deduction $1,200 For AGI Direct home office expenses Indirect Home office expenses: Real estate taxes ($3200 x 15%) Mortgage interest ($8000 x 15%) Insurance ($600 x 15%) Depreciation ($6000 x 15%) Repair and utilities ($2000 x 15%) Total indirect home office expenses Total direct and indirect home office expense deduction $480 $1,200 $90 $900 $300 For AGI For AGI For AGI For AGI For AGI $2,970 $4,170 lif he is an employee and maintaining an office at home just for her convenience home office expenses are not deductible for her. If an employee maintain an office at home and meet clients and do business there, home office expenses are deductible from AGI under miscellenous itemized deduction